Some investors rely on dividends for growing their wealth, and if you're one of those dividend sleuths, you might be intrigued to know that MaxiPARTS Limited (ASX:MXI) is about to go ex-dividend in just three days. Typically, the ex-dividend date is one business day before the record date which is the date on which a company determines the shareholders eligible to receive a dividend. It is important to be aware of the ex-dividend date because any trade on the stock needs to have been settled on or before the record date. In other words, investors can purchase MaxiPARTS' shares before the 26th of February in order to be eligible for the dividend, which will be paid on the 20th of March.

The company's next dividend payment will be AU$0.0305 per share, on the back of last year when the company paid a total of AU$0.051 to shareholders. Calculating the last year's worth of payments shows that MaxiPARTS has a trailing yield of 2.7% on the current share price of AU$1.91. Dividends are an important source of income to many shareholders, but the health of the business is crucial to maintaining those dividends. We need to see whether the dividend is covered by earnings and if it's growing.

Check out our latest analysis for MaxiPARTS

Dividends are typically paid from company earnings. If a company pays more in dividends than it earned in profit, then the dividend could be unsustainable. That's why it's good to see MaxiPARTS paying out a modest 40% of its earnings. A useful secondary check can be to evaluate whether MaxiPARTS generated enough free cash flow to afford its dividend. The good news is it paid out just 14% of its free cash flow in the last year.

It's encouraging to see that the dividend is covered by both profit and cash flow. This generally suggests the dividend is sustainable, as long as earnings don't drop precipitously.

Click here to see the company's payout ratio, plus analyst estimates of its future dividends.

Have Earnings And Dividends Been Growing?

Companies with consistently growing earnings per share generally make the best dividend stocks, as they usually find it easier to grow dividends per share. If business enters a downturn and the dividend is cut, the company could see its value fall precipitously. That's why it's comforting to see MaxiPARTS's earnings have been skyrocketing, up 54% per annum for the past five years. MaxiPARTS is paying out less than half its earnings and cash flow, while simultaneously growing earnings per share at a rapid clip. This is a very favourable combination that can often lead to the dividend multiplying over the long term, if earnings grow and the company pays out a higher percentage of its earnings.